Saving Taxes!
An encounter with the income tax department is usually fraught with stress, to say the least. But hearing from the IT department need not always be a bad thing. Sometimes, you might be pleasantly surprised to hear that you have been refunded some extra cash (with late fees)!
One can receive an Income-tax notice for several reasons, a few are given below.
1. TDS Amount Error: The most common issue with returns filed is often a mismatch in the TDS amounts. Sometimes your employer or deductor may have delayed or made a mistake filing their TDS returns. If that is the problem with your return too, request your employer to revise the TDS amount credited to you.
2. Discrepancy in Return Filed: If the discrepancy is with the amounts declared by you in the returns you filed, try to understand the difference. Differences may arise because:
Remember, these notices are generated automatically by the Income Tax Department’s software. Sometimes you may have filed everything correctly to the best of your knowledge, but still may have received a notice. It’s always good to have an expert look at your notice.
3. Documentation: Sometimes the IT department would like to review certain documentation based on which your returns were filed. In case of such a request, furnish the said documents immediately.
4. Tax Returns Not Filed: In case the notice is to remind you that you have not filed your tax returns yet, do so without any delay. The IT department can remind you about unfiled returns for the previous 6 assessment years. Delays in tax filing can sometimes lead to a penalty of up to Rs.5000 per year. If there are taxes unpaid in such cases of delayed filing, the assessee is charged 1% interest per month from the due date. If you are not required by law to file a tax return, then reply to the IT department clarifying this fact.
5. Investments in the name of spouse: Many individuals resort to purchasing assets in the name of their spouse, children or other close family members in the hope of evading taxes. Assets in this case refer to any kind of investment like land, buildings, fixed deposits, mutual funds, shares, debentures etc. Let’s say you bought mutual funds in your wife’s name. As per section 64 of the Income Tax Act, any income you generate out of these mutual funds is still considered your income and YOU will be taxed for it. You need to ensure that you declare such income at the time of filing your return, or else you will attract the attention of the taxman and receive a notice for the same.
6. High-Value Transactions: High-value transactions need to be updated to the Income Tax department by the entity with which you carry out such a transaction. This is in order to ensure taxes are levied as required on each of these transactions in a timely manner. Failure to do so is an invitation for a tax notice. What qualifies as a high-value transaction?
7. Random scrutiny: To enforce tax compliance, the IT department has started randomly scrutinizing returns under section 143 (3). If you receive such a scrutiny notice, don’t panic. Just follow these simple steps:
Still unsure? If you still have queries regarding an IT notice you received or are unsure about the next steps to be taken, get in touch with our experts at Cleartax.
A. Understand Notice: First and foremost – keep calm and read the communication you received end to end. Work around the legalese and understand what exactly are they trying to tell you. The first important thing you have to do when you receive a notice is to understand the communication sent by the Income Tax Department and work around the legalese.
B. Check the basics
C. Figure out the discrepancy: The new intimation format has 2 columns. Here’s what it looks like:
If a particular row shows different amounts in these two columns, that is the source of your discrepancy.
Never ignore a notice Ignoring a notice from the IT department can prove to be expensive. Fines are usually imposed on assessees who do not respond to IT notices – these can be as high as Rs.10,000!
Not sure what to do? Let the experts at ClearTax help you out.